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Corporate innovation strategy and disclosure policy

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  • Ning Jia

    (Tsinghua University)

Abstract

We examine the impact of a firm’s innovation strategy on its disclosure policy. Using a sample of innovation-intensive U.S. firms from 1992 to 2012, we find that firms with higher intensity of exploratory (exploitative) innovation are more (less) inclined to issue management earnings forecasts. These forecasts are generally less (more) optimistic, accurate and precise. We also find that exploration-oriented firms issue more earnings forecasts in order to avoid disclosing proprietary information about their innovation activities. They tend to issue more conservative forecasts in order to avoid large stock price decline. Overall, exploration-oriented firms have a more opaque information environment as manifested in higher analyst earnings forecast error and greater forecast dispersion. Our findings suggest that knowledge-intensive firms appear to incorporate innovation strategy in developing their disclosure policy.

Suggested Citation

  • Ning Jia, 2019. "Corporate innovation strategy and disclosure policy," Review of Quantitative Finance and Accounting, Springer, vol. 52(1), pages 253-288, January.
    • Handle: RePEc:kap:rqfnac:v:52:y:2019:i:1:d:10.1007_s11156-018-0709-6
    DOI: 10.1007/s11156-018-0709-6
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    More about this item

    Keywords

    Innovation strategy; Exploration; Exploitation; Management forecasts; Proprietary information;
    All these keywords.

    JEL classification:

    • M40 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - General
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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